Antitrust Accounting

Sherman’s March approaches Tigard

arlier this month, in an Oregon tort case filed against an attorney by a former client, an order was signed requiring the attorney’s attorney to establish his authority to appear and defend the lawsuit. This is an important question because the attorney’s attorney was retained by the state’s mandatory malpractice insurer, the Oregon State Bar’s Professional Liability Fund (PLF). The PLF is not allowed, by statute or policy, to defend claims of intentional tort, which the lawsuit was entirely based upon. The PLF is only allowed to defend malpractice suits.

The PLF’s appearance in an intentional tort suit — which alleges misconduct such as fraud and conversion — threatens the exemptions from federal antitrust law that currently sustain the PLF. That is to say, the case threatens the PLF’s continued existence.

This matter is of great importance not just to lawyers, but the public also, because the Bar and the PLF currently have an effective monopoly on law and justice in Oregon; and predictably in such a monopoly, they’re hoarding those things mainly for themselves.

his tort case provides a clear illustration of what can happen — absolute chaos — when the PLF goes rogue, bucking its own policies and the statutes that govern it, in order to defend against intentional tort.

First, a little history: In the 1970’s, it was decided that all Oregon attorneys should be required to carry malpractice insurance. Had that requirement been enacted, it would have protected the public from negligent attorneys and their mistakes.

But somehow it was not good enough for the Bar and its Board of Governors. They decided that they should have their thumbs in the pie. They created their own insurance company, the PLF, and required that all Oregon attorneys purchase their malpractice insurance exclusively through it.

As if this scheme isn’t bad enough on its face — i.e. the agency that licenses and disciplines attorneys also insures them — it seems far worse when one comprehends that there is no supervision of the Bar’s and PLF’s activities. They are instead simply allowed to vouch for their own exemplary behavior, if anyone cares to ask, which they almost never, ever do.

This arrangement is singularly outrageous and is entirely exclusive to Oregon: Only one other state (Idaho) even requires¹ attorneys to have malpractice insurance — let alone requires them to purchase it through their licensor and regulator, who is also unaccountable to the state and the public.

Which is precisely why the PLF’s presence and behavior in the above tort case is so improper: because the lawsuit stems from attorney misconduct that the Bar not only failed to regulate — despite clear warnings — but also became actively involved in perpetrating, through their extraordinary efforts to shelter their licensees from the civil and criminal consequences of their actions.

The Bar is caught in a feedback loop of extraordinary attention to and retaliation against this victim, and many others like him that I have not yet written about. The Bar is unable to stop itself, and continues until its victims are so overwhelmed that they are forced to give up, or so heavily damaged that they simply cannot continue.

If any other insurer besides the PLF were handling these cases — or staying out of intentional tort cases, as they are required to — many, if not most, would be settled quickly with minimal litigation. Moreover, there would be a robust community of attorneys specializing in prosecuting attorney malpractice cases. The fact that no such community exists in Oregon is testament to the Bar’s inability to tolerate checks on their power, even in the retail sense.

Good luck finding an attorney willing to go into battle against the PLF — an arm of his own licensor and disciplinary regulator, who has as rich a history of political retaliation against attorneys as it does the public. (And good luck even finding an attorney willing to try to clean up the mess left by the negligent attorney you’re trying to sue.)

he PLF’s mandatory insurance arrangement was challenged in 1988 by attorney Fred Hass, who contended that it violated the Sherman Antitrust Act and the commerce clause.

Hass lost, but Judge Warren J. Ferguson of the 9th Circuit Court of Appeals wrote a blistering dissenting opinion — an opinion which could serve as a virtual how-to-manual for dissolving the PLF, for anyone willing to go there. Judge Ferguson wrote:

The Bar’s private interests in the very field in which it regulates — professional malpractice insurance — coupled with the lack of public accountability for its [PLF]-related activities, reveals that the Bar presents a poor candidate for exemption from the active supervision requirement.

Conspicuously absent from the majority’s discussion is any acknowledgment of the potential for abuse when a state delegates regulatory authority to an organization, such as the Bar, which brings its own set of economic interests to bear on the regulated field. Experience has shown that, best intentions aside, the organized bar may seek to protect the interests of its members despite arguably conflicting public interests.

While the potential for self-interested economic behavior may not be sufficient in and of itself to trigger the active supervision requirement, when viewed in light of the Bar’s lack of publicly accountable decisionmaking, there is a need for state oversight.

The dissent went on to enumerate the many ways in which there is no oversight of the Bar or the PLF and “its Fund decisions,” such as through rate hearings, mandatory disclosure regulations, and checks upon the Board of Governors through an electoral process.

Judge Ferguson also wrote that “the operation of the [PLF] amounts to coercion” and “it is difficult to envision a more coercive practice than the one at issue” in Hass’s case.

udge Ferguson would have abolished the PLF right then in 1988. We need not imagine what he would say about the current situation, particularly since everything he warned was conceivable or probable has come to pass — as if the PLF had taken the dissenting opinion and adopted it as strategic initiatives.

It is as though the PLF decided to defy the Sherman Antitrust Act by defying it even more flagrantly, through more coercion and intimidation.

The Oregon State Bar and Professional Liability Fund’s monopolies have never been in worse disarray, or operated in worse faith — while the public (and the Bar’s licensees) have never been in worse danger from their self-dealing and lack of accountability.

Coming up next: The Oregon State Bar needed the Ninth Circuit to explain one of its own statutes to them — ORS 9.010 (5) “The Oregon State Bar… may sue and be sued.” See Crowe v. Oregon State Bar.

¹There are a few states that require malpractice insurance for particular business formations (LLC, LLP).